WorldCom CFO Accused of $3.6 Billion Fraud 571
winter was among the first to point out that allegations of fraud have led to a massive stock drop at WorldCom. A flurry of stories have popped up on Yahoo!, none of them good news for WorldCom. CFO Scott Sullivan is accused of misstating the company's revenues, specifically its earnings before interest, taxation, depreciation and amortization (aka EBITDA), and the stock has slid more than 50% (as of this writing) in after-hours trading.
jeez (Score:5, Insightful)
Re:jeez (Score:5, Interesting)
it is absolutely disingenious to hear executives say "we're shocked, shocked and appalled!" when you know DAMN WELL that accounting practices are rarely able to be hidden in the dark when they're THAT excessive... (especially when it comes to capitalization in my experience)
former employers of mine literally used to reprimand us when we didn't capitalize all our labor (which was clearly illegal in those particular cases, and everyone knew it well, but they'd actually try to defend the actions by suggesting that the accounting laws are being CHANGED in our favor in the near future).
there's never "one person" at fault for these situations, and whistleblowing is a tricky option....
either way, i enjoy seeing them (the unsavory executives) personally fail, but i hate the wake they leave in their rapid descent.
cheers.
Peter
Define "fail" (Score:5, Insightful)
Except that the exec's rarely if ever "fail" by any common sense standard. They almost never end up in jail (where they belong), and invariably walk away with more money then you, me, and a hundred of our best friends will make in a lifetime. If failure is a bum resume and ten million bucks in the bank, I'll take that over a nice resume and a mortgage any day.
Re:jeez (Score:2)
I'm also glad things like this only happen to American companies. The European economy is apparently immune to these sorts of scandals, which is a breath of fresh air.
Re:jeez (Score:2)
Well, that was a nice little rant.
Re:jeez (Score:2)
Re:jeez (Score:3, Informative)
It could be worse. I work at a R&D operation that supplies Worldcom. We were told last week that $50M of expected business had fallen through, and that lost us a bunch of conditional investment. And gee, now Worldcom discloses that it has $3.7B less than it thought. Spot the connection, and bear in mind that Worldcom will have put damage limitation and cost control in place before going public with this.
So now we've got an enforced company wide pay cut, compulsory redundancies with statuatory minumum compensation and no employee consulatation, and an off the record statement from HR that our contracts aren't worth the paper they're written on. The worst bit? Our CFO - the guy who booked $50M of potential sales plus conditional investment as a done deal - retains his job. Why? Because now, more than ever, we apparently need steady hands at the tiller. It's very brave and noble for the captain to stay at the helm and go down with his ship - but not if he's already asset stripped the lifeboats and thrown the entire crew overboard to gain bouyancy.
Sorry, gripe mode off. I just wanted to remind everyone that when you see headlines like these, it's not just the 17,000 poor shmoes at Worldcom that are getting stiffed. That $3.7B - and the lost investment and sales that it will cause - are going to be clawed back by cancelling orders or withholding money from suppliers, many of whom have already spent or invested on the basis that, hey, if you can't trust Worldcom to pay up, who can you trust. The hurt just spreads and spreads.
God damn but this is a bad time to be in telecomms.
Telecom meltdown (Score:3, Informative)
Not that you need much convincing, but this [nytimes.com] article over at the NYTimes is rather interesting, considering recent events. It talks about the extremely rough times that telecom companies are going through, and leaves open the possibility of a complete meltdown of that market. Scary, because as you said this affects everyone in the tech industry.
Re:jeez (Score:3)
O, sorry. I took you seriously. I should have realized that it was intended to be funny.
Oh goodie (Score:2, Insightful)
Better yet, let's just go to Reno and gamble it all away. Yeah!
Re:Oh goodie (Score:5, Insightful)
Every plan for reforming Social Security that I've seen has been voluntary. If you don't think you have the ability to manage your own money, you would be free to continue to fling it into the current Ponzi scheme. But those of us who do understand basic concepts of math and economics shouldn't have to suffer because of your fears.
Re:Oh goodie (Score:2)
This is untrue, there is an actual filling cabinet that holds the actual US Treasury bonds that are owned by the trust fund.
The accounting records kept by Social Security are no less real than those held by your bank. The only differences between Social Security and a real pension fund is that Social Security is only allowed to invest in the investment that gives the lowest return and the pension fund owners regularly borrow against the reserve.
That does not matter a whole lot because however 'insolvent' the trust fund might appear to become the US govt has plenty of discretionary spending to cut and can increase taxes if required.
The point of social security is not that it should be your only pension plan, it is simply a minimum pension plan that everyone is required to take out to make sure that the government does not end up with a large population of geriatric electors with no income who would inevitably vote themselves state aid.
Re:Oh goodie (Score:2)
Re:Oh goodie (Score:2)
Um, no. SS is simply a money *tranfer* plan. Take money from the young working bunch and transfer it to the old not working bunch. This has only worked because there have been more young working people than old people. The problem that is coming is that all of the babyboomers are going to be reaching retirement age soon and with the expected life expectancy going higher and higher there will not be enough young working people to support them all.
Show me the money... (Score:3, Insightful)
Really? Can you show me the document that says you'll get anything back from the money you and your employer "invested" on your behalf in FICA?
You can't.
Congress might fold it (unlikely), change the eligibility requirements (likely), change the benefits (certain). Anything could change, and specifically, you aren't guaranteed anything other than you have to pay
So FICA has an IOU from the treasury, but your name isn't involved anywhere. So YOU aren't owed anything.
But you OWE 15.4% on all your wages to this mythical retirement plan. Fortunately, your employer is NICE enough to pick up 1/2 the tab.
Re:Oh goodie (Score:3, Insightful)
I'm confused. Is Social Security a Ponzi scheme? Or is the stock market? While SS in many ways resembles a Ponzi scheme, it's been a remarkably sustainable one. On the other hand, hindsight has revealed that many Internet stocks not only resembled Ponzi schemes, but collapsed in short term screwing all but the early investors exactly as a Ponzi scheme should. If it walks like a duck, and quacks like a duck, it's a duck. If it promises huge returns, relies on an unsustainable number of new investors, and screws everyone but the top level, it's a Ponzi scheme. Good old fashioned Blue Chip stocks are fairly reliable. But a lot of the crap that the stock market has gotten away with over the last five years is just plain fraud.
Re:Oh goodie (Score:2)
Over any long period, the stock market outperforms cash, which is the option you have with not investing Social Security money.
If you invest, there is risk, yes, but there is also reward.
We pretty much know what happens if you just run a Social Security Trust Fund. It's just a big pyramid scheme where the future payees have to pay out all the benefits. It depends on either enslaving the young to pay for pensions or decreasing benefits to sub-poverty levels. There's really no other option.
Besides, it's just a huge strawman anyway. I've heard no proposal that puts all the Social Security money into the market, just sensible plans to move a percentage of the money currently going into the rathole Trust Fund into markets, where it can stimulate the economy.
Re: (Score:2)
MOD PARENT DOWN (Score:2)
At some point in the not too distance future, I will be at odds with my government and its eighty-year grandfather clause. Maybe I'll try and take a case before the Supreme Court and tear it all down.
Until then, there is one rule we all can live by. Do not trust any one entity with all of your cash, resources, etc. Not the federal government. Not a multinational. Not even your local bank.
The big question... (Score:4, Funny)
Accounting and Truth (Score:4, Insightful)
-Sean
Re:Accounting and Truth (Score:2)
You ask a question
and then you answer it. Clearly, why stop when they're doing so well?
And the sliding scales of justice say... (Score:4, Insightful)
Re:And the sliding scales of justice say... (Score:5, Insightful)
The scary thing is how accurate this comment is--we've reached a state where if you're a major company insider, your best path financially is to loot the company of 20-100 million, and then spend a fraction of it on your legal defense/settlement.
Until crooked CEO/CFO/CoBs start doing major jail time, this is going to keep happening. And with a wholly owned Shrub in the White House and soft-money campaign contributions owning Congress, real securities reform with meaningful deterrent provisions just aren't very likely.
What's even more scary is that even with all the accounting scandals and insider rip-offs, the US stocks are still considered one of world's most legitimate. Me? I'm going to invest my money in beer--at least the empties will be worth something.
Re:And the sliding scales of justice say... (Score:5, Insightful)
First off, let go off the revenge idea. The punishment should be punitive, in terms of making committing crimes a bad idea, not getting even. You never get even. Seeing the guy that raped your daughter being fried in the chair, will not bring your daughter back. For those people, I wish for them to live long lives in prison, tormented by regrets - alternatively with some hope if they have been wrongfully been found guilty.
Second, make it harder to sue someone. When you have people rushing into busses when they crash, to emerge later, holding their necks - well, you just have a big problem. Tort law has its perks, but you've let it go way too far.
Third, reduce the ability to compete by lawsuit. My impression is that a lot of companies use the court system for competititve purposes, suing their competitors as part of a larger strategy.
Fourth, put some regulations on severance packages and stock options. Those only encourage bad behavior. It is extremely dangerous to introduce badly thought out incentives anywhere, and giving a CEO an unconditional severance package is just folly. We'll see more of this, but I hope you'll learn some day.
I'm not an American, btw, but I studied there for three and a half years - 97 to 00. I'm actually Norwegian. Currently, the weak dollar looks to reduce the oil income that our social structures depend on substantially. So, your lack of control of your giant corporations is not only hurting yoruselves, but your allies as well. Not a good thing in these trying times..
CEO Stock Options, Accounting.... (PBS Frontline) (Score:4, Informative)
It was a nice idea (Score:2)
The companion website linked above has an extensive set of links and interviews. Highly recommended.
VA LINUX was used as an example in that report (Score:2, Funny)
Two year chart (Score:2, Funny)
And the first news article at that link says... (Score:2)
Tuesday June 18, 8:00 am Eastern Time
Press Release
SOURCE: OSDN
Forbes.com Provides Readers With Newsfeed From Slashdot [yahoo.com]
Slashdot-Branded Area Provides Forbes.com Readers With Cutting-Edge, High Tech Content
ACTON, MA--(INTERNET WIRE)--Jun 18, 2002 -- OSDN and Forbes.com today announced that Forbes.com will feature a newsfeed from Slashdot® -- one of OSDN's premier web sites -- providing senior-level business readers with access to cutting-edge, high-tech content online.
Forbes.com's recent web site redesign prominently features a Slashdot-branded area with a newsfeed from the site. Slashdot is one of the largest tech sites on the web, with coverage ranging from the ultra-technical to the ultra-controversial. Slashdot joins sites such as Reuters, which provides widespread news, and The McKinsey Group, which provides research updates, to Forbes.com readers.
"We were thrilled when Forbes.com expressed interest in a newsfeed from Slashdot because it will direct even more senior-level business professionals to the Slashdot site," said Richard French, general manager, OSDN. "This move will help to position OSDN to business readers as the place for high tech content, and will help OSDN continue to gain credibility in broader business markets."
"We pursued Slashdot because we think it will add to Forbes.com's Technology channel by providing the caliber of high-tech news our senior executive readership wants," said Paul Maidment, editor, Forbes.com. "Slashdot is a welcome addition to our site."
OK, now I'm scared...
How Many Techies Get the Shaft this Time? (Score:3, Insightful)
Re:How Many Techies Get the Shaft this Time? (Score:2)
A recent PT evening design job paying $10-$15/hr had over 100 applicants.
What do I do? It's the only skilled trade i know.
then you have Bernie Ebbers (Score:3, Insightful)
Now Bernie will recieve 1 million a year in retirement. He will still have to repay the 400 million dollar loan he took out against the company... the board said he can repay it in stock....
Re:then you have Bernie Ebbers (Score:2)
I was hired into ANS just as they were being Borged by MCI Worldcom. In the three years I worked in my building here in Ann Arbor, I worked for ANS, then UUNet - a Worldcom company, and then just plain Worldcom. With every name change, things kept getting worse, until I was worrying every day if I was going to go into work and find the side doors locked, and extra security at front door, like what happened on the Ash Wednesday when 14,000 people got fired nationwide at once.
Sinking ships, anyone? [cafepress.com]
-----
Apple hardware still too expensive for you? How about a raffle ticket? [macraffle.com]
So they fired the CFO .... So What? (Score:2, Interesting)
Working for a teleco has its scarey moments. (Score:2)
here's it's chart in after hours trading... (Score:4, Informative)
[yahoo.com]
Yahoo Real-time Mkt
Enron, WorldCom are just the start (Score:5, Insightful)
In today's economic environment, accountancy practices are under closer scrutiny than ever before - and not before time. The only reason why Enron were able to get away with fraud and misrepresentation on such a grand scale was because everyone - the accountants, the analysts, and the investors - had their eyes closed to the obvious.
Hindsight is 20/20, but even an idiot could tell you that, in an era where companies lie about just about everything, anything said by a CEO, issued by a press officer or printed in an annual report should be taken with a very large pinch of salt.
Post-Enron, the markets are very jittery, and many investors have lost faith entirely - if a seemingly sure-fire, blue-chip company like Enron can fall then anyone can. Freefall is an exaggeration, but compare how quickly the markets bounced back from September 11 to how badly they've reacted to the ongoing crisis of faith sparked off by the Enron/Andersen fiasco.
Witness how even the slightest sign of weakness is being jumped upon by analysts. Profits warnings and other negative indicators that would have shrugged off just twelve months ago are now being forensically examined by paranoid dealers anxious not to get caught out a second time.
One things for sure: there are a few more timebombs ticking away out there. Enron may have been just the first of many.
The bottom line is this: it's going to be some time until the markets recover and it's going to be longer still until we see the kind of market gains that we experienced in the 80's and 90's.
Maybe not (Score:2, Informative)
If it had been one of the other "Final Four" accouting firms, maybe it would have been the beginning of something huge. Expect a "what do you expect?" while they move on to the next scandal.
Re: Enron, WorldCom are just the start (Score:2)
> One things for sure: there are a few more timebombs ticking away out there. Enron may have been just the first of many.
After following the news, watching the PBS special, and reflecting on human nature, I've come to the conclusion that this is the norm rather than the exception.
Our whole economy (and indeed, most of our government) is focused on keeping share prices high at all costs. For companies, this means optimize the quarterly report at all costs. (Or even more frequently than quarterly, for an increasing number of companies.) So they are re-wiring themselves to be all marketing on the front side and all creative bookkeeping on the back, with a big gaping hole in the middle where the genuine power of the economy lies^w used to lie.
This does not bode well for the long-term health of our economy. The metaphor "house of cards" comes to mind.
Re:Enron, WorldCom are just the start (Score:2)
Or maybe we'll find out that there weren't any big market gains in the 90s.
Re:Enron, WorldCom are just the start (Score:2)
Technically speaking, Enron is not a Blue Chip company. That term is reserved for the thirty companies which make up the Dow Jones Industrial Average.
Pedantic, I know, but it's what I do best.
Re:Enron, WorldCom are just the start (Score:3, Interesting)
So, did we ever learn anything from the 80s? 20s? Can you all say no? The stock markets are all feeling, with a tad of analysis thrown in for good measure. There is little rationality there, just all poor leadership. That is part of the reason why the dot-com was allowed to happen, and that is why they are overreacting when one large company has fucked up (unless I am right in paragraph one).
The stock markets are all mass hysteria. We should be very worried that they have such impact on our lives.
Re:Enron, WorldCom are just the start (Score:3, Informative)
>investors - had their eyes closed to the obvious.
...unless you read NANOG-l, where the network engineers, architects and hackerish observers of the network industry have been saying for (literally) years "Bernie Ebbers is a crook, what a shame UU will probably go down in the wreck when it finally comes."
By all accounts (and from some personal experience as a customer) UUNet have a pretty solid, reliable, professionally run network. I just hope the receivers realise a lit network complete with engineering teams is worth a lot, lot more than a dark network with no engineers.
25 of 29 biggest telecom companies will go bye-bye (Score:5, Interesting)
This guy predicted that 25 of the largest telco companies will go down (and this 25 included Nortel, but that's the only name I remember), and NO ONE will rescue them at all, because the only way the other 4-5 companies will have a chance of a healthy life afterwards is if they let the companies go bankrupt (R.I.P.) while the 4-5 remaining companies will buy them up in a fire-sale.
Just wondering if anyone else heard about this prediction...it was just last week I think. I'd also like to get my hands on the article. If anyone knows anything about this, please let me know. I did a bit of Google searching and checked the NYTimes, but didn't find anything. Bad keywords probably.
Re:25 of 29 biggest telecom companies will go bye- (Score:5, Insightful)
there were a lot fewer people in the US and a lot less demand for cars. A shake-out was inevitable.
There would be no need for any of those 25 telecom companies to go broke if they were run properly -- there's plenty of customers and plenty of demand.
What we are seeing with WorldCom, Enron, Tyco, ect. is a recurring pattern. Companies with lots of customers and lots of revenue -- who are going broke. More and more companies are becoming the playthings of the wealthy elite and Wall Street -- existing not to produce goods and services but existing only to enrich a handful of people.
example -- @Home had over 4 million customers paying $45 a month. Do the math. And yet they went broke. Could it be the $6 Billion they blew on a worthless dotcom?
example -- Exodus Communications had $300 million gross revenue in 2000. In 2001 they had $660 million gross revenue -- more than double the previous year -- and filed for Chapter 11 at the end of 2001. Why? Blowing hundred of millions on bad aquisitions.
example -- AT&T hires a new CEO. Fires him less that a year later, citing "a lack of intellectual leadership" as the reason. But gives him a $26 million severance package.
example -- Hewlett-Packard/Compaq -- History shows very clearly that there has never been a merger of this type that has worked out well. Not one. And yet the deal was done anyway because it will enrich the people who engineered the deal. 5 years from now, when Hewlett-Packard is following in the footsteps of WorldCom and Carly Fiorina is fired by the HP board of directors, it won't matter -- she and a few others will have already pocketed their millions and will draw a nice severeance package as a reward for running the company into the ground.
example -- Dozens of companies who are doing poorly, profits are down, even losing money in some cases, but top executives receive large raises and bonuses.
'20's auto market probably an excellent analogy (Score:5, Informative)
I suggest you look up 'Kondratiev cycle technology'. Jay Forrester (inventor of magnetic-core memory), studied this at MIT/Sloan school and determined that the a long-term economic cycle develops due to the 'self-ordering' nature of capital equipment.
Basically Forrester's group found evidence for the following feedback loop: Early in the deployment of any technology there is a scarcity of capital. Capital equipment is expensive, and early investments involve high degrees of risk accompanied by high profits in a given technology sector. That in turn brings investment in the businesses developing this capital. However, a large part of this capital is used in the development of the capital itself (i.e. IT tends to need advanced hardware and software to develop the bleeding-edge new hardware and software for actual end-use).
Thus the 'buildup phase' of new technology creates a high demand (for both the acutal equipment and the stock of the companies that make it). At some point, however the generation of this new (and expensive) equipment (or software) exceeds the actual (end-user) demand. When this happens the high profit margins that were being realized during the build-up phase disappear quite rapidly, the investment-value follows (crashing stock prices) and the investment money looks for other places. See this article [gold-eagle.com]
Sound familiar? Whether or not you buy into the economic details, this is one of the behaviors seen in economics. The inflated acquisition prices mentioned are the direct result of this effect.
Because sure people make stupid mistakes even (especially?) with billion dollar transactions. But the funny thing about the stock market is that the money doesn't ever go away. Whenever someone loses in the market, someone else has made a profit.
And yes it sucks when the players break the rules but especially on the financial rules the market punishes you very hard. I worked for a biotech firm that was growing well, showing solid net earnings ca $300m on $2b sales, a 30:1 p/e ratio. Our japan division was found to have been moving inventories to the tune of changing the sales #'s by $50m. This lie, accounting for only 2.5% caused a nearly 50% drop in stock price and a (justified) shareholders lawsuit.
Whenever someone fsck's with the rules of the game (fixing the books, insider trading, breaking anti-trust rules, whatever), real people get hurt and we have SEC, IRS etc to try and keep up with the process. MS imo is an excellent example of how a determined and unscrupulous competitor can harm while evading the systems controls(sic).
I'm just thanking my stars that (so far) the politicians havent fscked up like they did after the '29 stock market crash. The US enacted protectionist trade tarrifs which effectively were the first blow in killing off the *world* economy.
Post-sept-11'th fears and RIAA / DMCA idiocies aside, at least across a several bumpy decades our boneheads in Washington, the EU, etc at least so far have managed not to fsck up. They still have opportunities to snatch defeat from the waiting hands of victory, but so far it could be a whole lot worse I think.
Re:'20's auto market probably an excellent analogy (Score:5, Interesting)
I think this is the part that scares me the most, or at least that we have that much effect on the world economy. We have terrorist attacks in the past few months and the continuing threat of more attacks in the near future. This during the whole dot-com bubble bursting and tech companies taking big hits. Then we have Enron and Worldcomm and who know what else on the horizon. Not to mention the nose dive the US dollar is taking on the currency markets. And who gets hit hardest?
Europe and Japan.
Japan, already in the middle of a bank crisis they're too proud to admit to, is actively trying to prop the dollar up. The EU, who have been trying to bring the Euro to parity with the dollar, find themselves the victim of the ancient curse "May you get what you want." Foreign investors watch the value of their dollar investments go down while US exporters get nice perks like making money in currency exchange rates (even for small-time eBay shmucks like me). And I haven't even touched upon what this can do to China, who pretty much rely on their ability to export cheap labor. The only thing I'm not sure about is what this all means to those countries who have pegged their currencies to the dollar or have abandoned their currency for the dollar outright.
The scary news is that the US has some difficult economic times ahead of us. The sacrier news is that things will still probably be better here than anywhere else. The scariest news is that we'll probably come out of this even bigger than we were before.
Re:'20's auto market probably an excellent analogy (Score:3, Interesting)
Those two points of yours are mutually exclusive. Yes, you will be able to buy US goods at a better price, but that better price will likely undercut European manufacturers and bring more business to US exporters.
currency markets != stock markets != goods & services markets. The currency market is probably the most volatile you can find, and while the price of a dollar may be going down, the prices of goods and services marked in dollars are much more static and will stay at the same levels in relation to each other. Next week $0.25 may not get me 0.25 but it will still buy me a pack of gum until at least the end of the fiscal quarter.
Let's say I'm a US exporter selling widgest at $1.00 each. You want to buy some, and the exchange rates of the day are $1.00 = 1.00 so you send me 1.00 and get your widget. I then take the 1.00 and send it to my US bank, who then puts into the EU banking network and by the time the payment gets processed the exchange rates have changed to 1.00 = $1.10 and I just "made" a dime.
I may not have technically made money but, as I said before, things priced in US dollars go down along with the value of a dollar. The cost of me buying a widget from my wholesaler was $0.75 last week, $0.75 this week and it will be $0.75 next week, while in terms of euros it started at 0.75 and dropped down to about 0.63 in that same time period.
But even if I don't know the dollar will be slipping again next week, there's no reason (at least not in the short term) for me as a widgets seller to prop up my prices to compensate for the falling dollar because my wholesalers aren't raising their prices. And they're steady because the widget factory prices go down with the dollar, and so on and so forth all the way back to the US widgetonium mines.
And since the prices from US exporters remain static with the dollar (not the euro), those prices will undercut the local EU suppliers who can't afford to lower their prices. And since the WTO frowns upon tariffs and such, it will be the EU companies that start taking losses, not the US ones.
This is why the Japanese government is in a mad scramble to prop up the dollar while Washington is more than comfortable with cooling their heels for a while.
Re:25 of 29 biggest telecom companies will go bye- (Score:2)
VOIP = Cisco Stock Inflation (Score:3, Insightful)
So who should we get connectivity from? (Score:2)
Customers like choosing big-name companies because they seem like they ought to be safe. I've come across some real horror stories related to smaller, more local ISPs. So, what's an ordinary business supposed to do to get ISP service that they can rely on for a few years running, without paying through the nose?
Wouldn't hire me..... (Score:2, Insightful)
Thanks, Worldcom! (Score:5, Insightful)
Vultures are already circling (Score:2, Informative)
Neither rep's had any sort of data to back this claim up with the exception of Worldcom's current stock price.
It wasn't until informing them that AT&T was once trading at $90.00 per share and now was under $10.00 that they finally shut up and left me alone.
Re: (Score:2)
You mean CEO's aren't honest? (Score:5, Insightful)
If morals meant profits, capitalism would be the garden of Eden.
Re:You mean CEO's aren't honest? (Score:2)
Good thing the analysts have this one covered! (Score:4, Insightful)
enron again? (Score:2)
The funny thing is that they still have a huge ass enron sign up at pac bell park in SF. These mega-corp scandals are just getting worse and worse.
Its not to say that this bulshit hasnt been happening for hundreds of years... but its about flipping time that some light got shed on it - and maybe the world can start getting rid of all the BS criminalism in corporations and governments by seeing this shit and finally saying that we have had enough. I am not in favor of the death penalty for humans - but i consider people who do these sorts of thing (and car salesmen/politicians) to be sub-human... so I ahve no problem with death penalties for such massive rip off scams as this.
Corporate Imperialism (Score:2)
All examples of companies that have become large and powerful by being deceptive. What does the US government do about it? Not a damn thing. Why? Because they are all big spenders and heavily linked to the political status quo.
If you want to read a really enlightening book, check out Stupid White Men [amazon.com] - I kid you not, this book will open your eyes.
We are at a point in the world where there is a new aristocracy - the corporate powers - and it is only getting worse. You think they control the government now? Give them another 6 years of this administration and we will all miss the days of individual freedom...
Sorry if I come across as a downer - things just don't seem that good these days...
Just my $.002
--Jon
Re:Corporate Imperialism (Score:2, Insightful)
All examples of companies that have become large and powerful by being deceptive.
Yeah, and all these companies are in the shit-can because they were deceptive. They have all lost power. This is good. This is the way it is supposed to work.
People are running around crying about how awful capitalism is because this happened. This sort of thing is exactly what should happen. You fuck-up an lie, and your company is screwed. Good.
Not funny... serious. (Score:5, Interesting)
A quick peek of the Yahoo WCOM Message Boards [yahoo.com] shows many desperate messages about people threatening suicide [yahoo.com] and serious financial losses [yahoo.com].
These are the people who the suits at the top never think of, while they enrich themselves.
Comment removed (Score:5, Insightful)
Re:Not funny... serious. (Score:3, Insightful)
Much as I'd like to join you planet Naive (soon to appear in a bad Lucas movie), perhaps you might consider stock options, which are worth a lot more if you kite the stock upwards? Or incentive clauses, such as forgivement of loans if stock price targets are met? I don't know if WorldCom execs made use of these standard vehicles for executive compensation, but that's been SOP in other corporate meltdowns. They don't steal cash, they prop up the stock with fraud while exercising their options (which although they are not yet required to be considered a hit against company earnings, definitely do reduce the company's equity dollar for dollar when exercized.)
Re:Not funny... serious. (Score:2)
Audit (Score:3, Informative)
Worldcom Press Release on this matter. (Score:4, Informative)
On another page I jus saw was the headline... (Score:3, Funny)
Too bad for WorldCom it wasn't the old "Community Chest" card reading "Bank error in your favor. Collect $3.8 Billion dollars"
blame corporate law (Score:3, Insightful)
Generation d(ude where's the money) (Score:2)
WorldCom is proud to offer its employees a full range of comprehensive benefits.
Additionally, employees can take advantage of a corporate 401K plan, investing up to 20% of their salaries in a variety of fund options. As an added perk, WorldCom matches 100% of an employee's contribution to the 401k plan, up to 5% of the employee's salary, after only one year of employment. Planning for the future is of the utmost importance, so WorldCom makes this investment easy for every full-time employee. And with WorldCom's online employee tools, registration and management of these benefits are easy -- yet another example of our forward-thinking, next-generation company.
Hope you didn't buy WC stock!
SD
A lot of people saw this coming... (Score:3, Informative)
We all know that power and money doesn't circulate within a vacuum. Everything in the world is tied together, so that when one force of influence diminishes another will rise to take its place. The five main players I see in the modern world economy are - The governments, big business, small business, unions, and workers/individual consumers. The dynamics and fairness/wealth distribution of an economy are highest when there is a balance of influence between each of those forces. Historically, they are rarely balanced (and in some countries they are completely imbalanced), but I think the opportunities to correct it are greater than ever now.
As you may guess, I believe that the weight of influence in the American economy (in a concerted push since the early 80's) has tipped to predominantly favour big business and big government/military. Since America's economy is twice the size of number 2 - Japan - it controls global economic policy and as such is creating mirror economies to its own around the world. This imbalance is spreading like an epidemic around the world, seriously affecting other countries who model themselves off America - like my own country Australia.
So, what can be done about it? It seems a rebalancing isn't going to happen on its own, or at least not until the current situation degenerates to a point where violent revolution is needed to fix the problem. I guess there's several paths that could be chosen but here are two off the top of my head. One - allow the current consolidation of small and medium sized business into large/uber businesses to continue but restore power to the unions. Two - shift all laws that favour big business to favour small business instead.
Personally, I favour the latter. A society run by small business is far less likely to have organised and entrenched corruption - eg Would Dick Cheney have been swayed by the CEO of a company that controlled only one or two power stations? What benefit would a government get by helping out small companies that can't contribute many campaign funds and have little influence around the nation?
Anyhow, I think I'll cut the sermon off here. I think +5 troll and +5 offtopic is a good enough effort for today!
Google Sets (Score:5, Funny)
(Discovered by Ksosez on #mozillazine.)
Microsoft have dodgy accounting practices too... (Score:3, Informative)
However, having untold billions in the bank should help a little
Re:An even though.. (Score:4, Insightful)
nobody should actually care what is going on. ive seen a simple fork from a college cafeteria sell on ebay for $15. does that price seem correct for the product? hardly. ebay proves that people will pay for stuff that is literally worthless. but oh wait, its not worthless if people are willing to pay for it.
the capital system is, by definition, and efficient market. all company news is built into the current stock price, therefore what you are really paying for when buying a stock is the expectation that the company will prosper in the future. this will breed good news, which will then appropriately help people value in the stock in a new context. that is why a stock like amazon was a high flyer during the late 90s. the expectation that amazon was going to take out brick and mortars, and the fact jeff bezos was time magazine's man of the year all helped boost the expectation and perception that the stock would be worth a higher price in the future. therein, lies the science: you buy a company that will do well enough to give a perception
Re:Not quite... (Score:3, Insightful)
the capital system is, by definition, and efficient market. all company news is built into the current stock price,
No, no, no...in Worldcom's case, the 'company info' that was built into the stock price was completely false. This led to a stock price that was way out of line with its true value- not because investors made an educated choice based on accurate information, but because they were misled.
Re:An even though.. (Score:5, Insightful)
For good reason.
1) Worldcom is MCI and UUNET. MCI is the first of the competitive long distance companies and the second largest telecom. UUNET is the first commercial ISP and one of the largest. Both may just go away now.
2) Bankruptcy of something as large as Worldcom can affect a lot of other operations. While the people who buy the pieces will probably keep them running, the people they bought equipment and owe money to can probably kiss it goodbye (along with future orders they were counting on and building equipment to fill). So can everybody who bought their stock or bonds: Banks, retirement funds, money market funds, bond funds, corporations who parked some of their cash reserves in those funds,
3) Also if they go belly-up, their stuff gets sold at bankruptcy-auction prices, like ten cents on the dollar or less. Equipment winds up on E-bay and equipment manufacturers find themselves competing against their own stuff. Bottom drops out of market and equipment manufacturers suffer still more. If the buyers keep MCI and/or UUNET running, they now have working networks for which they paid nearly nothing. So they can drop their prices almost to the cost of operation and undercut competitors who had to pay for (and are still paying for) their equipment. The other tecoms and/or ISPs tighten belts further and/or start operating at a loss and also go belly-up. Down go more suppliers, more investors, more associated industries. Maybe some of THOSE go belly-up, and the fire spreads further.
4) It's another accounting scandal. (Anderson again. Oops.) This will make investors leery of other companies, raising the perceived risk of further financial scandal. ("Once is chance, twice is coincidence, three times is enemy action.") The value of stocks and corporate bonds is ONLY what people are willing to pay for them at any given instant, and people base their valuation on perceived risk vs. benefit. If the risk just got bigger than the benefit, they won't trust stocks and bonds and won't buy them. The whole market tanks.
A broad drop the market from this makes perfect sense to me.
Re:An even though.. (Score:3, Interesting)
If the buyers keep MCI and/or UUNET running, they now have working networks for which they paid nearly nothing. So they can drop their prices almost to the cost of operation and undercut competitors who had to pay for (and are still paying for) their equipment.
If their equipment is put up for auction, all those competitors out there will have an equal chance to bid up the prices. So it doesn't make sense to say that equipment will go for nearly nothing, allowing huge prices cuts. If the equipment is cheap enough everyone will bid on it, and it won't go for nearly nothing anymore.
Also, don't ignore the positive effects that a cheap equipment auction could have. Maybe some company will be able to keep a few more employees with the money they save buying used MCI racks.
Not if you already have a network (Score:2, Insightful)
Some of the competitors already have working networks. It makes no sense to buy a nationwide network or the equipment to operate it if you've already got one of your own. This really sucks for companies that have actually shouldered the cost of building and maintaining these networks, because now some competitor is going to come along and slaughter them.
The carriers will have to drop their prices below the break-even point, and there will be further layoffs and maybe even bankruptcies. And as the industry contracts, competition disappears and the consumer eventually pays for any short term benefits he/she may may have enjoyed.
Re: Worldcom and UUNET "may just go away now" (Score:2)
Actually, in one key way, UUNET is already gone. UUNET has always been one of the main channels for spam broadcasting (maybe because they were first, maybe because they were biggest, maybe because their sales staff accepted anyone (including previously-terminated customers), maybe because their abuse department was slow, I'm not sure).
But during the past few months, I've seen no responsive action to abuse and spamming complaints. It appears that Worldcom may simply have closed down the abuse department.
At one point, I researched (lots of tracerts) and then concluded that more than 90% of the spam I get, comes from servers whose internet connections are through UUNET.
If I could just shut off the pipe to block everything coming from any UUNET/Alter.net/Worldcom customer, I'd do it. I think that single step would eliminate 90% of incoming spam and probably only a handful of legitimate emails.
Re:An even though.. (Score:2, Interesting)
And the sad thing is, is that this is going to be caused by a company that was trading at 62 cents before the news hit.
No it can't. (Score:2)
You can't murder work.
Re:No it can't. (Score:2)
If I burn your house down, well, arson carries a stiff penalty. If you lose your house because I defraud you, I might get a small fine and a nice minimum security break. Boo-hoo.
Terrorism?! (Score:5, Insightful)
I'm sick and tired of people trying to relate everything bad to terrorism. I highly doubt that this MCI guy was deliberately sabotaging anything, but that's not even the point. "Terrorism" is when you do bad things to inspire terror. Terror is a key mechanism in terrorism! If you, say, sabotage the US economy slowly by eroding investor trust over the course of months or years, that's surely harming us, but it's not terrorism!
Here's an example of some very effective terrorism: the recent "dirty bomb" thing. It's effective because the average American knows squat about radiation. Americans are so stupid that they won't buy irradiated food because they think that it's radioactive! The effect is compounded by TV "journalists" who know just as little, but are more than happy to trumpet the term "dirty bomb" over the airwaves for at least a week. And our beautiful executive branch is so eager to trumpet their success in foiling the plot that they play up the danger such a device poses in stead of spreading some usefull information about how radioactive materials work. Hello!? I bet that the actual terrorists are scratching their heads, wondering if they should retire and just let the US gov. do all their work instead.
</rant>Re:Terrorism?! (Score:3, Funny)
Yeah... it was pretty funny how the tv news shows whipped out the old mushroom cloud pictures to run along with the dirty bomb story. Yeah, they have a clue.
Re:history in the making (Score:2)
Re:history in the making (Score:2)
dont we already have an organisation for global jurisdiction over anything and everything: the US government
If you havent noticed - the US government is slowly pushing itself into the world governors chair and forcing every nation on the planet to comply with our desires. I mean we just told Arafat that his time is ended - and we announced that we are basically going to form a palistinian state within 3 years. Name another country/government that has so much power as to be able to form nations by verbal command
I mean we already use the US military to help enforce what the government wants - how would this be any different.
Re:history in the making (Score:2)
WRONG! (Score:3, Insightful)
Re:WRONG! (Score:2)
but instead, i'll just add you to my friends list.
Re:WRONG! (Score:3)
I LOVE the way it's ALWAYS an AC that takes your point of view.
OK, let's start with Obvious Shit 101:
Corporate interests are not aligned with the people. For example, that chemical plant down the street from you would rather dump their toxic waste somewhere rather than dispose of it in a safe way. Why? Because it is more profitable for them to dump it. There are BILLIONS of examples of this type of stuff.
The government's role, among other things, is to protect the public from corporations. In this case, bullshit accounting has caused GREAT HARM to citizens of this country. Without RULES, corporations will continue to harm citizens and generally cause havoc. The current ecomonic downturn was made worse by Enron and others, and the responsibility for the creation of the Enron's rests squarely on the shoulders of our government. If you really want to know more, watch Bigger than Enron on PBS [pbs.org] program. It explains how we got into our current state very well.
But it's ALREADY illegal. (Score:4, Insightful)
But it's already illegal!
and DRASTICALLY increased penalties for offenders. No Club Fed for this guy or Ken Lay and his Enron cronies. No, they need to spend their lives in Lousisana's Angola Prison where deer and Aligators play and everyone stands upright in the shower.
I'm completely with you there. Who cares whether the crook took a thousand bux by waylaying you on the way from the bank, cracking your account, burlgling your house, scamming you, or faking a corporate financial report and causing you to lose it in the market? You're out just as many bux.
(Extra points for force and threat of force, of course.)
Re:But it's ALREADY illegal. (Score:2)
Re:Thank Goodness (Score:2)
Re:$6 Billlion in fraud, actually. (Score:3, Informative)
June 25 -- WorldCom has uncovered what people close to the company describe as a massive fraud, inflating a common measure of its earnings by more than $3.8 billion over the last five quarters. The company late Tuesday confirmed its intention to restate its earnings and said it had notified the Securities and Exchange Commission.
6 billion seems to be what their earnings should be:
Without these transfers, the company's reported EBITDA (earnings before interest, taxes, depreciation and amortization) would be reduced to $6.339 billion for 2001
Re:Oops! (Score:2)
Re:Oops! (Score:4, Insightful)
We give these things special names ("white collar crime"), don't police them especially rigourously, and allow people to escape liability hiding behind limited-liability constructs, so why wouldn't you take the risk?
Re:Oops! (Score:2)
It's really sad in the corporate sector, since even admitting you have been stolen from causes a drastic drop in your stock value. From the typical corp's point of view, better to let Joe Schmoe get away with a couple of hundred grand, than publically go after him, and lose millions on the stock market.
Martha saved herself somewhere between $40,000 - $80,000 through (allegedly) insider trading. Her stock value (MSO) has dropped around $200,000,000!
You can bet Sullivan has sold vast quantities of his stock, and invested it elsewhere, before this news broke. As long as he hasn't broken any laws (and corporate types excel at this, as they have highly paid lawyers to arrange immoral actions in a legal manner), his personal assets are untouchable.
Re:Oops! (Score:2)
That's how Enron became one of the top ten companies in the US, when it was totally illiquid and on the verge of bankruptcy.
It's kind of an arms race, because if your competitors were doing it, you had to do it too.
Re:Poor Stock (Score:2)